MarketWatch's top stories of the week

Everybody makes mistakes, even Alan Greenspan. That may well have been the biggest news of the week.

The good news is that the once-respected chairman of the Federal Reserve admitted in congressional testimony this week that he had made a mistake. But the bad news is that it looks like he is at least partly mistaken about what he got wrong.

Greenspan appears to believe his big mistake was that he believed in the corrective power of self-interest in the marketplace. That belief was the keystone to his free-market ideology. Self-interest was supposed to ensure that banks and other companies didn't do anything that put their shareholders and their equity at risk.

And clearly he was wrong about that. If we have learned anything over the past year, it is that companies and individuals don't always make choices that advance their self-interests. Markets don't reliably self-correct.

The bad news actually comes on two fronts. First, even though Greenspan acknowledged this error, he didn't propose any significant changes to the financial system to make up for it.

But Greenspan appears to have made a more profound mistake, which was to confuse the importance of having an ideology with being ideological. It may be true, as he told Congress Thursday, that we all need an ideology to help us organize our approach to the world. But Greenspan, whose free-market ideology led him to fight meaningful regulation for his entire career, didn't use his ideology this way. Instead, he allowed it to govern all his decisions, even when the facts and logic contradicted it.

That's not having an ideology. That's zealotry.

U.S. stocks had a miserable week. The Dow Jones Industrial Average
fell 312.30 points or 3.6% on Friday to close at 8,378.95, notching a 5.4% decline for the week. The broader Standard & Poor's 500 Index
fell 31.34 points or 3.5% on Friday to end the session at 876.77, a loss of 6.8% for the week. But the real pain was in the Nasdaq Composite Index
which fell 51.88 points or 3.2% on Friday to close at 1,552.03, a loss of 9.3% for the week.

Stay with MarketWatch.com over the weekend for all the news you need. Our weekend features include a look ahead to next week's meeting of the Federal Reserve, as well as an examination of what will be at stake in the upcoming global financial summit called by President Bush.

-- Christopher Noble, assistant managing editor

Fleeing for the exits

After a roller-coaster decade that's seen the Internet bubble burst, the retreat after the Sept. 11 attacks and a wave of confidence-shredding mutual-fund scandals, some investors have simply had enough. With the S&P 500 lower than it was a decade ago, they're planning to leave the markets behind, never to return. Over the past few months, about 1.8% of the entire stock-fund industry has headed to the exits. Read the full report.

Not-so-safe haven

The price of gold often tends to rise when the economy is in trouble, but its recent slumps have defied conventional wisdom. Gold futures hit a historic high above $1,000 an ounce a few days after Bear Stearns was taken over by J.P. Morgan Chase & Co.
DJIA, +0.45%
in March. But in the recent round of crises, triggered by the collapse of Lehman Brothers Holdings Inc.
LEHMQ
gold has fallen to below $700 for the first time in 13 months. Learn what's behind the trend.

Fateful mistakes

Three current and former financial regulators told Congress they made fateful mistakes that helped drive the global financial system to the brink of disaster, and urged Congress to fill the regulatory gaps. Former Federal Reserve Chairman Alan Greenspan testified that he still believes the "self-interest" of banks and other financial firms is the best protection against malfeasance, because both sides of the trade will police the other. But, Greenspan said, he and others are in "a state of shocked disbelief" that "counterparty surveillance" failed. Find out what else they said.

Bring on the indignation

The backlash Americans exhibited against the bailout plan recently passed by Congress wasn't just a misunderstanding. It merely represented the boiling point for a long-simmering resentment against Wall Street and Washington for failed leadership and missing the call to duty. People wanted to kill the bailout to punish the fat cats of the financial sector, but was that really the right response? David Weidner examines the fallout.

Speaking out

If you blinked, you might have thought you were watching a scene from the movie "Borat": Mortgage executives gathered in a large room are caught off-guard by disturbances in the audience, making for moments of uncomfortable silence. But unlike the scene where Borat streaks through a ballroom of mortgage brokers, protesters who charged on stage made some serious points at the Mortgage Bankers Association's annual convention this week. And no one was laughing. Find out what happened.

Emerging worries

Fears over Central and Eastern Europe's ability to weather the global credit crunch mounted this week after Hungary drastically hiked interest rates in an effort to halt a sharp currency slide. Hungary's central bank raised its key lending rate by 3 full percentage points to 11.5% in an emergency move to defend the nation's forint currency. Investors have become increasingly wary of vulnerable emerging markets following the collapse of Iceland's currency earlier this month, but Hungarian officials blasted comparisons with Iceland as irrelevant. Get the full report.

Problems with pensions

The U.S. Pension Benefit Guaranty Corp., which insures private-sector pension plans and manages failed ones, lost at least $3 billion in stock investments through August, and that's likely been exacerbated by the global markets' meltdown in September, said Rep. George Miller, D-Calif. Pension plans at S&P 500 companies are taking a huge hit this year, raising the chance that corporations will have to make large unplanned cash infusions next year, even as global economic growth slows, which could undercut profits. Find out more details.

Banking on a deal

In a move that signals yet another turn in the government's dramatic attempt to rescue the U.S. financial system and restart credit flows, the Treasury agreed to invest $7.7 billion in PNC Financial Services Group Inc.
PNC
which will use the lion's share of those funds to buy regional rival National City Corp.
JPM, +0.67%
The deal to acquire Cleveland-based National City, valued at roughly $5.5 billion in stock and cash, confirms recent market speculation that banks receiving Treasury investments might use those funds to finance acquisitions rather than for direct lending. Get more on the story.

Striking repercussions

When Boeing Co.
BA
machinists walked off the job early last month, the impact of halted production lines was felt far beyond the aircraft manufacturer's silenced facilities. That's because Boeing depends on an extensive supply chain for its jetliners, having outsourced its avionics, communication equipment, seats, landing equipment and even toilet seats to a long list of suppliers. Recent earnings announcements have shown that the strike's impact is beginning to run deep across the entire aerospace industry. Find out more.

Growth on call

Apple Inc.
PNC, +0.57%
has had a good run for several years, first due to booming sales of the iPod and then the growing strength of its Mac computers. While those products are still selling well, it now appears to be the iPhone's turn to become the standout product and complete the third leg of the company's business strategy. Read the full report.

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